Debt and the Stock Market

  • Do you like nice round numbers? Well, here are two for you. Just recently the Dow Jones average crossed the 20,000 mark. For many of us that's an amazing number. I was a broker back when it was less than 1000! Is it a bubble or the real thing? I won't venture a guess. At least not in public. But it's certainly noteworthy.

     

    The other number is the federal debt. Right now it's at $19.85 trillion dollars and going up at a rate of over $300 million a day! So we're only months away from a $20 trillion federal debt. That number, too, is amazing. Just as recently as 2000 it was just(?!) $5.6 trillion.

     

    You may ask what the two numbers have in common. It's more than the fact that they both start with 20. All of the money that's going to pay interest on the federal debt is money that could be going to build more jobs and businesses for us. Instead it's just going to pay for money that's already been spent.

     

    Right now that's not so bad. Interest rates are at lows not seen in generations. But if - make than when - interest rates return to more normal historical levels the interest payments will crowd out other investments and that will hurt businesses and eventually the stock market.

     

    So the next time someone tells you that the federal debt doesn't matter ask them where they got that idea and challenge them to defend it. Because sooner or later debt always has a cost. It's true for people. It's true for businesses. It's true for government.

     

    Keep on Stretching those Dollars!
    Gary

     


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